PRESS RELEASE
Questions and Answers at the Governor’s Press Conference, 30 October 2013

Question - My question may sound slightly political but it actually concerns more the Albanian households. The recent political movements have brought about large-scale dismissals in the public administration. Do you think this will lead to an increase in the level of non-performing loans and decrease in domestic consumption?

Answer - This item is not subject of our statistical evidence.

Question - Although third-quarter inflation was below the lower end of the Bank of Albania's target range and expectations point to a low inflation, you decided not to cut the key interest rate further. Does this perhaps also reflect the loss of confidence that domestic demand may be boosted through further monetary stimulus? Does the Bank of Albania fear that a further cut may act as a trigger for an informal money market? What are the main reasons behind this decision, although the main indicator, that of inflation and related expectations, would perhaps legitimate another intervention?

Answer - In order to answer your question, I would have to re-read the Supervisory Council's statement, although we Albanians would rather hear things directly than have to read them. However, to sum up, I would note that the Bank of Albania has launched multi-faceted incentives, not only concerning the monetary framework, but also the macro-prudence. We expect these incentives to materialise, taking into account the better functioning of the transmission mechanism. Based on our expectations for higher economic growth in 2014, we consider it important to give all the necessary and positive stimuli to enhance the credibility of the Albanian economy and, at the same time, unfold all our economic potential across the domestic and external markets. This is critical to establish the trust required to ensure long-term and continuous growth. In this context, it is imperative to point out the reality of the Albanian economy and its potential.

What is important is that the Bank of Albania has examined the situation far-sightedly along a 360-degree spectrum, and considers that keeping the key interest rate at the present level is the best stimulus to fuel domestic demand growth. Let us not forget that in the present macroeconomic context, the current rate of 3.5% implies we are very close to zero in real terms, and that the stimulus has been more than sufficient. The Bank of Albania considers that keeping the key interest rate low is necessary to ensure better anchoring of inflation and trends in Albania's economic developments. Today's stance, therefore, factorises the present and looks at the monetary policy in the short run.